KUNJALATA P. SHAH, MUMBAI V. ASST CIT 20(1), MUMBAI

ITA 2325/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71405 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-08-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 09-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R M MADHAVI
• Assessee Lawyers: S C TIWARI; NATASHA MANGAT
• Keywords: Business income; Speculation loss; Onus to prove
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 2325/MUM/2012 ( / ASSESSMENT YEAR: 2004-05) KUNJALATA P. SHAH 13-B, MAHAL INDUSTRIAL ESTATE, MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI-400 093 VS. ASST. CIT-20(1), MUMBAI ! ' ./PAN/GIR NO. AADPS 3784 L ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !#& / APPELLANT BY : SHRI S. C. TIWARI & MS. NATASHA MANGAT $%!#'& / RESPONDENT BY : MS. R. M. MADHAVI ( )*'+, / DATE OF HEARING : 08.08.2013 -./'+, / DATE OF PRONOUNCEMENT : 14.10.2013 0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-31, MUMBAI (CIT(A) FOR SH ORT) DATED 16.02.2012, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S .143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A. Y.) 2004-05 VIDE ORDER DATED 31.12.2010. 2 ITA NO.2325/MUM/2012 (A.Y. 2004-05) KUNJALATA P. SHAH VS. ASST. CIT 2. THE APPEAL RAISES A SINGLE ISSUE, PER ITS TWO GR OUNDS, I.E., THE MAINTAINABILITY IN LAW OF THE CLAIM OF SET OFF OF THE BROUGHT FORWARD BUSI NESS LOSS OF THE EARLIER YEARS IN THE SUM OF RS.34,63,790/- BY THE ASSESSEE AGAINST THE BUSIN ESS AND SPECULATION PROFIT FOR THE CURRENT YEAR. IT WOULD BE RELEVANT TO RECOUNT THE B ACKGROUND FACTS OF THE CASE. THE ASSESSEE, AN INDIVIDUAL, IS A TRADER OR OTHERWISE D EALS IN SHARES AND SECURITIES. AS THE SAME ALSO INVOLVES SPECULATIVE TRANSACTIONS, I.E., WHERE THE CONTRACT OF PURCHASE AND SALE IS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY OR TRANSF ER (OF THE SECURITIES BOUGHT OR SOLD), THE ASSESSEES CLAIM FOR SET OFF OF BROUGHT FORWARD LOS S FOR THE EARLIER YEARS, BEING A.YS. 2000-01 TO 2003-04, WHICH STOOD RETURNED AS SPECULA TIVE LOSS, AGAINST THE BUSINESS (NON- SPECULATIVE) PROFIT FOR THE CURRENT YEAR WAS DENIED BY THE ASSESSING OFFICER (A.O.). THIS IS THE SECOND ROUND BEFORE THE TRIBUNAL, WHICH REMITTED THE MATTER BACK TO THE FILE OF THE A.O. IN THE FIRST ROUND FOR A DECISION AFRESH IN ACCORDANCE WITH THE LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE ON HER SHOWING A PRIMA FACIE CASE, I.E., IN TERMS OF ASSESSED BUSINESS LOSS FOR THE EARLIER YEARS, WHICH IS AS UNDER: ASSESSMENT YEAR AMOUNT (IN RS.) A.Y. 2000-01 5,06,753/- A.Y. 2001-02 22,50,918/- A.Y. 2002-03 59,326/- A.Y. 2003-04 6,46,793/- TOTAL 34,63,790/- IN THE SET ASIDE PROCEEDINGS, THE A.O. DECLINED TO ADMIT THE ASSESSEES CLAIM OF THE BROUGHT FORWARD LOSS AS BEING IN FACT COMPRISED OF NON-SPECULATIVE BUSINESS LOSS AS WELL, FURNISHING THE DETAILS/BREAK-UP AS UNDER (REFER PB PG. 314): DETAILS OF TRADING (DELIVERY) PROFIT/(LOSS) AND SPE CULATION PROFIT/LOSS AS PER TRADING, PROFIT & LOSS ACCOUNT. A.Y. TRADING (DELIVERY) PROFIT/(LOSS) SPECULATION PROFIT/(LOSS) NET (LOSS) AS PER TRADING, PROFIT & LOSS ACCOUNT BALANCE LOSS AVAILABLE FOR SET OFF (I) (II) (III) (IV) (V) TRADING SPECULATION 2000-01 (-) 7,67,236.87 (+) 2,60,484.30 (-) 5,06,752.57 (-) 5,06,752.57 NIL 3 ITA NO.2325/MUM/2012 (A.Y. 2004-05) KUNJALATA P. SHAH VS. ASST. CIT 2001-02 (-) 9,98,752.97 (-) 12,52,164.76 (-) 22,50,917.73 (-) 9,98,752.97 (-) 12,52,164.76 2002-03 (-) 68,993.00 (+) 9667.00 (-) 59,326.00 (-) 59,326.00 NIL 2003-04 (-) 97,393.29 (-) 5,49,399.50 (-) 6,46,792.79 (-) 97,393.29 (-) 5,49,399.50 (-) 34,63,789.09 (-) 16,62,224.83 (-) 18,01,564.26 A.Y. 2004-05 (I) TRADING (DELIVER) PROFIT (DETAILS ATTACHED HERE WITH) 14,29,207.69 LESS: BROUGHT FORWARD TRADING (DELIVERY) LOSS SET OFF AGAINST ABOVE PROFIT RESTRICTED UPTO ABOVE PROFIT FROM A.Y. 2000-01 TO 2003-04 (AS PER ABOVE) 16,62,224.83 BALANCE LOSS OF RS.2,33,017.14 TO BE SET OFF AGAINS T SPECULATION PROFIT 2,33,017.14 (II) SPECULATION PROFIT (DETAILS ATTACHED HEREWITH) 35,07,219.83 LESS: BROUGHT FORWARD SPECULATION LOSS SET OFF AGA INST ABOVE PROFIT FROM A.Y. 2000-01 TO 2003-04 (AS PER ABOVE) 18,01,564.26 BALANCE TRADING (DELIVER) LOSS OF SET OFF AGAINST ABOVE PROFIT 2,33,017.14 BALANCE SPECULATION PROFIT AS PER RETURN 14,72,638 .43 FURTHER, AS THERE WERE VARIANCES IN THE DETAILS FU RNISHED BY THE ASSESSEE AT VARIOUS TIMES, AND WHICH IT FAILED TO RECONCILE OR OTHERWIS E SUBSTANTIATE, HE ASSESSED THE INCOME AT RS.77,37,540/-, I.E., AS ORIGINALLY ASSESSED (VIDE ORDER U/S.143(3) DATED 29.12.2006), DISALLOWING THE ENTIRE CLAIM FOR SET OFF OF BROUGHT FORWARD BUSINESS LOSS OF RS.34,63,790. THE SAME STOOD CONFIRMED IN APPEAL BY THE LD. CIT(A ). IT WAS NOT OPEN FOR THE ASSESSEE TO SAY THAT A PART OF THE BROUGHT FORWARD BUSINESS LOS S WAS IN FACT NOT SPECULATIVE, AND IN FACT REPRESENTED NORMAL BUSINESS PROFIT. AS SUCH, THERE WAS NO SCOPE FOR THE ADJUSTMENT THEREOF AGAINST THE BUSINESS INCOME FOR THE CURRENT YEAR, WHICH, OR NO PART OF WHICH, PER THE RETURN OF INCOME IS REFLECTED AS A SPECULATIVE INCOME PER THE RETURN FOR THE CURRENT 4 ITA NO.2325/MUM/2012 (A.Y. 2004-05) KUNJALATA P. SHAH VS. ASST. CIT YEAR. THE PROVISION OF SECTION 73 OF THE ACT, PLACI NG THE SAID EMBARGO, WAS ADVERTED TO, BEING CLEAR AND PATENT IN ITS INTENT AND SCOPE. AGG RIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE LAW IN THE MATTER IS CLEAR, AND THE LOSS OF A SPECULATIVE BUSI NESS, WHETHER BROUGHT FORWARD OR FOR THE CURRENT YEAR, COULD NOT BE SET OFF AGAINST THE NON- SPECULATIVE BUSINESS INCOME FOR THE CURRENT YEAR. THE SPECULATIVE TRANSACTIONS CARRIED OUT BY THE ASSESSEE CONSTITUTE A BUSINESS IN ITSELF, AND TOWARD WHICH WE MAY REFER TO EXPLANATION 2 TO SECTION 28 OF THE ACT. AGAIN, IT IS ONLY THE LOSS AS ASSESSED THAT CAN BE CLAIMED FOR BEING BROUGHT FORWARD AND SET OFF, AND IT IS NOT, THEREFORE, OPEN FOR THE ASSESSEE TO CONTEND, AS IT DOES, THAT A PART OF THE BROUGHT FORWARD BUSINESS LOSS FROM THE EARLIER YEAR S IS NOT SPECULATIVE IN NATURE, I.E., AS RETURNED (FOR THOSE YEARS), AND TOWARD WHICH, THE L D. CIT(A) HAS ALSO REPRODUCED NOTE 2 AS APPENDED BELOW THE COMPUTATION INCOME ACCOMPANYI NG THE ASSESSEES RETURN OF INCOME FOR A.Y. 2003-04 (AT PARA 3.1.1 OF HIS ORDER ). THE REVENUES CASE IS, THUS, IN PRINCIPLE, UNEXCEPTIONAL, EVEN AS OBSERVED BY US DU RING THE COURSE OF HEARING. SO HOWEVER, WHILE NO SUCH BREAK-UP, I.E., AS BETWEE N SPECULATIVE AND NON- SPECULATIVE INCOME, AS FURNISHED BY THE ASSESSEE DU RING THE ASSESSMENT PROCEEDINGS FOR THE CURRENT YEAR, IN RESPECT OF THE BROUGHT FORWARD LOSS(ES), COULD BE ADMITTED, THERE IS NO REASON OR BASIS FOR NOT ADMITTING ITS CLAIM INSOFAR AS IT RELATES TO THE BUSINESS INCOME (PROFIT) FOR THE CURRENT YEAR, CLAIMED TO BE SPECUL ATIVE IN PART. AS REGARDS THE DIFFERENCE IN THE FIGURES FILED BY THE ASSESSEE, THE SAME WOULD B E, AND AGAIN FOR THE SAME REASON, IRRELEVANT. IT IS ONLY THE BUSINESS LOSS/ES AS RETURNED AND ADM ITTED FOR THE EARLIER YEARS THAT WOULD QUALIFY FOR BEING BROUGHT FORWARD AND, A CCORDINGLY, SET OFF AGAINST THE CURRENT YEARS INCOME . IN FACT, THE ASSESSEE WOULD ALSO SHOW US THE REAS ON FOR SOME DIFFERENCES, REFERRED TO BY THE AO, WHICH ARE ON ACCOUNT OF THE ALLOCATION OF INDIRECT EXPENDITURE OVER THE INCOMES FROM THE TWO BUSINESS STREAMS, I.E., SP ECULATIVE AND NON-SPECULATIVE BUSINESSES (PB PG. 317). THE SAID DIFFERENCES, THUS , WOULD BE TO NO CONSEQUENCE. 5 ITA NO.2325/MUM/2012 (A.Y. 2004-05) KUNJALATA P. SHAH VS. ASST. CIT THE A.O. IS, ACCORDINGLY, DIRECTED TO EXAMINE THE A SSESSEES CLAIM FOR A PART OF THE BUSINESS INCOME FOR THE CURRENT YEAR AS ARISING OUT OF ITS SPECULATION BUSINESS. IF AND TO THE EXTENT THE BUSINESS PROFIT FOR THE CURRENT YEAR IS FROM THE SPECULATION BUSINESS, THE SET OFF OF BROUGHT FORWARD BUSINESS LOSS (SPECULATIVE) WOULD BE VALID, OF COURSE, TO THAT EXTENT. ACCORDINGLY, SUBJECT TO THE NECESSARY VERIF ICATION AND FINDINGS BY THE ASSESSING AUTHORITY, WE DIRECT A SET OFF IN TERMS OF SECTION 73 R/W S. 80 OF THE ACT. THE ONUS TO PROVE ITS CLAIM ON FACTS, WE MAY CLARIFY, WOULD BE ON THE ASSESSEE. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED ON THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 14, 2 013 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER ( 1* MUMBAI; 2 DATED : 14.10.2013 )3 ROSHANI , SR. PS ! ' #$%& ' &$ COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( 4+ 5 6 / THE CIT(A) 4. ( 4+ / CIT - CONCERNED 5. 7)89$3+3:; ,:;/ ( 1* / DR, ITAT, MUMBAI 6. 9<=* GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , ( 1* / ITAT, MUMBAI